Louisiana Public Sector Retirees Win Public Pension Lawsuit.

The Retired State Employees Association of Louisiana (RSEA) has won its lawsuit contesting LouisianaвЂ™s adoption of a вЂњ401K-likeвЂќ cash balance plan for new hires in their state.В (I am confident that if such an organization existed in Colorado the Colorado General Assembly would have failed to enact legislation breaching Colorado PERA pension contracts in 2010 (SB 10-001.)В The Louisiana Legislature overreached, and their unconstitutional attempt to reform public pensions has been struck downВ (as we know, several state legislatures are making such an attempt.)В However; this Louisiana ruling really doesnвЂ™t contribute much to the legal defense of public pension benefits in the U.S., since it simply relates to the level of support that was necessary for its enactment by the Louisiana Legislature.В The nature of contractual public pension benefits was not at issue in the case.

From the Louisiana State Employees Retirement System:

вЂњCash Balance Plan Ruled Unconstitutional On Thursday, January 24, 19th Judicial District Court Judge William Morvant ruled Act 483, known as the Cash Balance Plan (CBP), unconstitutional. Attorneys representing the Retired State Employees Association (RSEA) filed the lawsuit on August 16, 2012 challenging the constitutionality of House Bill 61, which became Act 483 of the 2012 Louisiana Legislative Session.В RSEA claimed the law required a two-thirds vote because an actuarial cost was associated with its enactment, based on Article X – Section 29(F) in the Louisiana Constitution.

The House of Representatives passed the CBP with a simple majority, lacking the 70 votes of the elected members. The legislation would have affected future non-hazardous duty state employees of LASERS, post-secondary education members of the Teachers’ Retirement System, and would have been optional for certain Louisiana School Employees’ Retirement System members.В The plan would have taken effect for these new hires on July 1, 2013.вЂќ

вЂњNeither the House nor Senate gave the bill a two-thirds vote on initial passage.вЂќ

вЂњJindal, who was out of town for a national Republican Party speech, issued a statement pledging to appeal Morvant’s decision, an appeal that will go directly to the Louisiana Supreme Court.вЂќ

вЂњвЂWe are disappointed in the court’s ruling and we look forward to a successful appeal.В We’re confident that the bill was constitutionally passed,вЂ™ the governor said.вЂќ

вЂњвЂThe constitution is clear, and the Legislature didn’t follow the rules,вЂ™ said Robert Klausner, a lawyer for the Retired State Employees Association.В вЂIf they want to pass the cash balance plan, they just have to do it the right way.вЂ™вЂќ

вЂњA Baton Rouge judge on Thursday struck down a 401(k)-type pension plan that was scheduled to take effect July 1 for future state employees.вЂќ

вЂњState District Judge William Morvant, who did not rule on the merits of the so-called вЂcash balanceвЂ™ plan, agreed with the Retired State Employees Association of Louisiana that the plan did not get a two-thirds vote in the 2012 legislative session, as required by the state Constitution.вЂќ

вЂњMorvant ruled at the conclusion of a daylong bench trial of an RSEA lawsuit against the state and Gov. Bobby Jindal, that Act 483 is вЂinvalidвЂ™ because it was passed in violation of the Constitution.вЂќ

вЂњKlausner argued in court that, even after the LegislatureвЂ™s own actuary advised that the cash balance plan had a cost attached to it, state lawmakers did not approve the measure by a required two-thirds vote.вЂќ

вЂњA 2010 amendment to the state Constitution required a two-thirds vote of the Legislature, rather than a simple majority vote, for proposed changes to any public retirement system that have actuarial costs.вЂќ

(Recall that Colorado PERAвЂ™s own Buck Consultants report [November 20, 2001] clearly identifies the Colorado PERA 3.5 percent COLA as вЂњautomatic,вЂќ refers to вЂњguaranteed benefits at retirement,вЂќ and the вЂњfixedвЂќ COLA, that is вЂњcompounded annually for each year of retirement.вЂќВ It is significant that the 2001 Buck report identifies the 3.5% Colorado PERA COLA as вЂњautomaticвЂќ and contrasts it with an вЂњad hocвЂќ COLA вЂњas approved by Legislature.вЂќ